A not-so-simple issue of vicarious liability

The House of Lords has recently refined the test to establish an employer’s
vicarious liability for acts commited by its staff, by Nicholas Moore

The recent overnight dip in the stock market was apparently caused by a
trader tapping in an extra nought on his computer. It was clearly his mistake
but it was his employer who owned up, apologised, took the flak and sorted out
the problem.

In the event that anyone chooses to litigate over the matter it will be the
employer, rather than the trader, who will be "in the dock." This is
due to the concept of vicarious liability, whereby legal responsibility is
imposed on the employer, even though it is itself free from blame.

Conversely, had the trader made a mistake in his private life, it would have
had nothing to do with his employer. He would have faced the consequences
alone.

As ever with the law, things are not always so simple. Some employees commit
negligent acts in a "twilight zone" between work life and private
life, and it is not clear whether the employer should be liable.

The law has been grappling with this issue for many years. It had until
recently come to the conclusion that the employer will be liable if the act was
an unauthorised mode of doing an act authorised by the employer.

In many cases, this test worked well. It is clear that the trader who tapped
in an extra nought was doing an act authorised by his employer (trading).
However, in some cases it has been possible for the employer to argue,
successfully, that the employee in question was not doing an authorised act at
all. This meant that the more bizarre the act in question, the more likely it
was that the employer would not be vicariously liable for it.

In Lister and others v Hesley Hall, 2001, UKHL22, the House of Lords
considered a case in which a warden of a residential school for children with
behavioural difficulties sexually abused some boys in his care. He was sentenced
to seven years’ imprisonment but the boys brought claims against his employer,
on the basis that it was vicariously liable for the warden’s actions.

The warden’s employer had clearly not authorised him to abuse the children,
and so it defended the claim on the basis that this was not an authorised act.
On the other hand, the warden’s employer had authorised him to care for the
children, and he had done so in an unauthorised way.

The House of Lords decided to take a more broad brush approach. They took
the view that "a better approach is to concentrate on the relative
closeness of the connection between the nature of employment and the particular
tort". In particular, they asked whether the warden’s torts were so
closely connected with his employment that it would be fair and just to hold
his employer vicariously liable. They decided that they were, and so the
employer, although blameless itself, was liable to the boys.

Key points

– Employers are vicariously liable for the acts of their staff

– Vicarious liability arises where the employee’s act is so closely
connected with his employment that it would be just to hold his employer liable